Assets for the Ghetto

Long before "black capitalism" be came a politically popular catch phrase, Negro-owned "soul banks" started sprouting in ghetto areas. In 1962, there were ten Negro-owned and operated banks in the U.S., mainly in the South.

Now there are 20. Their total assets are still quite low -- less than 1% of the $24 billion of the Bank of Amer ica, the nation's largest -- and their performance has been less than sparkling.

As a group they have earned no profit for the past three years. The failure is due to the lack of trained management and to all the handicaps of slums: high unemployment, low incomes and savings and marginal local businesses.

There is a pronounced difference between the old and new banks. The older ones are run by more conservative men and showed a 4.8% profit last year. The officers of newer banks tend to be more aggressive and inclined to take greater risks in lending to help build the black community. Most of their banks are in the red.

Outside Advice. There are also some promising newcomers. Three that have done well are Seattle's Liberty Bank, Kansas City's Swope Parkway National Bank and Boston's Unity Bank and Trust Co. All were started only last year, riding the wave of black consciousness. All got support from white bankers or businessmen.

Since Unity Bank was set up last June in the Negro Roxbury district of Boston, it has made about 600 loans without loss and brought in almost 6,000 depositors with more than $7,000,000 in accounts. About two-thirds of its clients are black, but the bank also gets business from some white-owned firms, including the Gillette Co. and New England Mutual Life Insurance Co. President Donald Sneed Jr., 35, a former real estate broker, reported a profit of $47,520 for the first six months of the bank's operations.

The idea for a bank in Roxbury came from a Negro student at Harvard Business School, John Hayden, now 26. He wrote his master's thesis on black banking and then started buttonholing influential people, including Sneed. Businessman Sneed, who never went to college, did most of the groundwork. He advertised "the bank with a purpose" in the ghetto weekly and sold $10 shares in the venture to 3,358 small investors. Boston's National Shawmut Bank and the New England Merchants National Bank contributed advice.

Business at Unity is done in a deliberately casual atmosphere designed to put people at ease. Rock music plays softly from loudspeakers. Bank employees banter with people who just drop in to have a neighborly chat. "We're more than a bank," says Sneed. "If we have to say no to a customer, we say, 'No. Because . ..' "

Psychological Need. In Seattle, more and more Negroes who previously did not believe in depositing money in any bank are putting their trust in Liberty Bank, which opened last May. Within the first 70 days, deposits reached $1,000,000; they had more than doubled by Dec. 31. Liberty's vice president, James I. Burton, 46, an engineer by training, says: "The bank has given pride and impetus to the black community. I think it demonstrates that the Negro doesn't want everything handed to him."

His sentiments are echoed by La-Vannes C. Squires, 38, president of Kansas City's Swope Parkway National. The black-owned bank is "a major psychological need for the Negro, particularly the young," he says. Set up last July, Swope Parkway now has more than $3,000,000 in accounts.

The banks that succeed seem to do so by recruiting able management and making the local black community feel deeply involved. One problem is that many Negroes still feel more secure depositing their money with white bankers. This will be overcome in time, as education spreads. The longer-term danger is that, in their desire for safe profits, the black bankers may become overly prudent and turn down loans to the new Negro entrepreneurs who alone can turn the dream of "black capitalism" into a reality.

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